11/17/2010 @ 6:00PM

America's 200 Largest Charities

Go to Guidestar and search its large database of nonprofits for the keyword “poverty.” The query leads to 5,432 nonprofits. Look for “cancer,” and 7,258 charities come up. Both are dwarfed by results for “museum”: a whopping 17,250 organizations.

There are more than 1.4 million registered nonprofits in the country, many of them operating locally rather than nationally. You can get a tax deduction by giving to just about any of them. But how do you figure out the ones that will make best use of your dollars?

We can’t help you pick your causes. But we can suggest a few pointers about how to evaluate charities in a very Forbesian way–by their financial efficiency.

To that end, we present the 12th edition of our annual list of America’s 200 Largest Charities, as ranked by private donations. The Forbes Charity 200 is a flush group; the top 10 alone received $45 billion in contributions during their most recent reported year.

Still, with the economy ailing, average donations to the 200 fell a sharp 11%–to $211 million each. Average revenues per charity were flat at $611 million, with the difference made up by government grants, sales of services or products and investments.

OK, you say, but how is data on the biggest charities going to help me figure whether the local food bank is using my dollars well? Easy. Our data includes financial efficiency evaluations and trends for all kinds of charities–including five food banks, which redistribute donated goods to the needy. Look at similar operations to get a sense of financial efficiency norms for the kind of charity you’re evaluating. Sure, smaller, out-of-the way nonprofits might not be as efficient as the giants. But then again, their salaries and overhead expenses should be lower too.

As always, we advise against comparing efficiency ratios for different categories of charities. There’s no valid way to size up a hospital vs. a foreign disaster relief outfit vs. a museum.

Financial efficiency is hardly the end-all. But before making a charitable contribution you should be doing your own due diligence, and you have to start your research somewhere. Our list will provide plenty of food for thought.

Our list is based on numbers and oriented toward donors, so we exclude from consideration certain categories of nonprofits. These include academic institutions (which solicit mainly from their alums); donor-advised funds (gifts from you to your own quasi-foundation); and religious groups, which don’t have to report numbers to the Internal Revenue Service (we can’t list what we don’t know). We also ignore nonprofits with few direct donors, such as Ted Turner’s United Nations Association; most private foundations (they don’t solicit from the general public); charities that get most of their gifts from other charities that solicit; and a few whose data we question.

Key to our display are three financial efficiency ratios, and the trend in those ratios. The higher, the better. Here’s what they are and what they mean:

Charitable Commitment

This calculates how much of a charity’s total expense went directly to the charitable purpose (also known as program support or program expense) as opposed to management, certain overhead expenses and fundraising. The average this year is 86%, unchanged. At the low end are the Smithsonian Institution (58%), Paralyzed Veterans of America (63%), Northern California Broadcasting (64%), Operation Smile (66%) and Veterans of Foreign Wars of the U.S. (67%). At the top, all at 100%: Brother’s Brother Foundation, Christian Blind Mission International, Gifts in Kind International and Operation Compassion. The four are gift-in-kind charities, receiving most of their donations as large gifts of goods, which entails far lower overhead.

Fundraising Efficiency

A much scrutinized number, this ratio shows the percentage of gifts left after subtracting the cost of getting them. The average this year: 90%, a little less than last year’s 91%. We long have recommended a harsh look at any charity with a fundraising efficiency below 70%. The five on our list below that cutoff: Educational Broadcasting Corp., which operates New York City public TV station WNET (56%), Veterans of Foreign Wars of the U.S. (58%), Girl Scouts of the USA (62%), World Wildlife Fund (66%) and Paralyzed Veterans of American (68%). At the top end, 20 charities, mostly gift-in-kinds, share a 100% rating.

Donor Dependency

This measures how badly a nonprofit needs your contribution to break even. We subtract the annual surplus or deficit from gifts, then divide this figure by the gifts. The higher the percentage, the more the charity needed your charity. A result above 100% means the nonprofit ran a deficit. A rating below zero means the charity would have broken even without any contributions at all. This ratio is tremendously affected by investment performance and is the most volatile of our measures. This year’s average is 92%. That’s down from 95% last year. In the salad days a few years ago when markets were roaring, the ratio was in the 60s.

Our database also lists each charity’s top total compensation to a single employee. This includes salary, benefits, one-time payments and deferred compensation, and may be for a previous fiscal year. The average is $624,225, down 5% from last year–in Forbes’ 12 years of tracking, a first-time drop. But 26 nonprofits still listed someone getting upward of $1 million. That recipient is usually the top person, although not necessarily the current one.